Can Non-Profit Organizations Sell Tickets to a Concert?

By Sarita Douglas

Whether a nonprofit organization can sell concert tickets, or conduct any other common fundraising activities, is a something it needs to consider before embarking on the project. The primary issue its fundraising team will want to take into account before making the decision to proceed is the way that the IRS will characterize the fundraising activity in relation to the nonprofit's tax-exempt status. The organization should also determine whether state registration of the event is required.

Whether a nonprofit organization can sell concert tickets, or conduct any other common fundraising activities, is a something it needs to consider before embarking on the project. The primary issue its fundraising team will want to take into account before making the decision to proceed is the way that the IRS will characterize the fundraising activity in relation to the nonprofit's tax-exempt status. The organization should also determine whether state registration of the event is required.

Unrelated Business Income

In general, a nonprofit maintains its tax-exempt status when it conducts activities that support the tax-exempt purposes of the organization, such as an animal shelter providing care for its animals. If an activity is unrelated, any income earned might be considered unrelated business income, which is taxable. The test to determine whether income is UBI involves meeting a three-part test: First, it must be from a business or trade activity. Second, the activity must be carried on regularly. Third, the business must not substantially relate to the organization’s exempt purpose.

Ready to form a nonprofit? Get Started Now

Fundraising Activities

Whether a nonprofit organization can sell tickets to a concert depends on how the activity fits into the three-part test. A nonprofit chamber orchestra could sell concert tickets on a regular basis as part of its exempt purposes. A school support organization, such as a PTO, could sell concert tickets as long as it doesn't sell such tickets frequently or regularly. An annual fundraiser, for example, is not considered something that's carried on regularly.

Paying Taxes on UBI

A nonprofit organization can pay tax on UBI and not lose its tax-exempt status as long as the UBI is only a small part of the overall income of the organization. However, dealing with this can be messy, with increased filing requirements and the potential need to defend the organization's other activities fitting with its exempt purposes. It is generally preferable to keep all fundraising activities within the exempt purposes of the organization.

Individual State Requirements

Nonprofit organizations should check any requirements of the state or states in which they are going to conduct fundraising activities. Many states require registration with the state charity organization, for example, before seeking contributions from state residents. The website of the National Association of State Charity Officials has a list of all U.S. state charity offices.

Ready to form a nonprofit? Get Started Now
Non-Profit Fundraising in the State of Florida

References

Resources

Related articles

How to Start a Non-Profit Organization for At-Risk Youth

Starting a nonprofit for at-risk youth can be as complex as starting a for-profit enterprise. Although it may be tempting to focus solely on the organization's mission, the business aspects of starting a nonprofit are equally important. Early mistakes can have long-term consequences on the organization's ability to fulfill its charitable purpose.

How to Convert a 527 to a 501(C)

The Internal Revenue Code establishes a range of different tax-exempt entities, each of which is governed by its own set of rules. Converting an organization exempt under Section 527 of the Code into an organization exempt under Section 501(c)(3) requires particular care, because a 527 organization is a tax-exempt organization that engages in political campaign activity but a 501(c)(3) organization is prohibited from supporting or opposing a candidate for elected office.

How to Incorporate a New Church in Indiana

Federal and state tax relief is available to churches that are formed as nonprofit corporations in Indiana. This treatment can be vital to the survival of the church, as donations typically make up a large portion of the operating budget. The state requires certain initial filings to form the nonprofit. Afterward, your church must pursue tax exempt status at the federal level. Once the Internal Revenue Service approves you application, you may obtain the state exemptions.

Doing the right thing has never been easier.

Related articles

Rules for 501(c)3 Corporations

Many charities pursue 501(c)(3) status because it allows organizations to avoid certain taxes and accept tax-deductible ...

How to Start a Nonprofit Foundation

If you want to improve your community or meet a social need that no other local organization is pursuing, you might ...

How to Find 501(C)(3) Tax Exempt Companies

To obtain a 501(c)(3) tax exempt status, most nonprofit companies must file documents with the IRS proving they operate ...

Requirements to Maintain 501C3 Status

More than 100 501(c)(3) organizations lose their exempt status every year, according to the Nonprofit Risk Management ...

Browse by category